Thursday, August 9, 2012

While
investors are already buying into the companies on market talk of a break up of
F&N, there is still some way to go. The situation still remains extremely
fluid as Heneiken’s buyout deal still needs shareholders approval. There
is not much update this venture. Although It has been reported in the news,
neither Coca-Cola or Kirin has actually come
out to make an offer.

Most agree that the breakup will come. The fact that people are still
buying into the companies shows they still see value in the food and beverage
assets. Many players have previously said that the market has never been short
on buyers, rather on quality sellers. The two major shareholders, ThaiBev and
Kirin are not property developers. So it would make sense
for them to focus on the F&B business and leave the property division.

Assuming Coca-Cola is a keen acquirer, implications for F&N
Malaysia are positive. Coca-Cola would either have to acquire F&N’s
51% stake in F&N Malaysia, which would trigger a GO or offer to acquire the
soft drinks division. Calculation suggest that the bottling business is worth
at least rm1 billion.

If APB is sold then the next asset play within the group would be
F&N Malaysia and not long ago, Kirin was
said to be mulling a bid fro the non beer F&B assets. Recent comment by
Kirin’s president that it invested in F&N fort its F&B operations
further fuels the belief that Kirin ’s
move to buy a 14.7% stake in F&N from Temasek in 2010 was driven by its
stake in F&N Malaysia.

In the meantime, all eyes will be on the upcoming EGM for shareholders
to approve the Heneiken bid, even though no date has been set. The jury is
still on whether Thai businessmen who owns ThaiBev will make a move to block
Heneiken’s bid. It was Charoen’s buying of a 22% stake in F&N
in July 2012 that triggered the situation and he has since upped his stake to
24.1% by buying through the open market.

Market observers are not discounting more twists and turns ahead, which
could include a potential counter bid from ThaiBev. Kirin
holds the key to whether APB is eventually sold. ThaiBev is likely to vote
against the proposed sale as APB is a better strategic fit for it than APB is
for Kirin . If Kirin
agrees, it is likely that the final decision will be the sale of APB to
Heneiken.

If the sale is rejected by shareholders, Heneiken could come back with
a higher offer, which would extend the proceedings by a few more months. The
worst case scenario is if the sale is rejected and status quo remains would
have an adverse impact on the share price of F&N Malaysia and APB.